Multi-Channel Distribution Strategies in the Financial Services Industry
DISSERTATION
der Universität St. Gallen,
Hochschule für Wirtschafts-,
Rechts- und Sozialwissenschaften (HSG)
zur Erlangung der Würde eines
Doktors der Wirtschaftswissenschaften
vorgelegt von
Patrick Dahmen
aus
Deutschland
Genehmigt auf Antrag der Herren
Prof. Dr. Walter Ackermann
und
Prof. Dr. Christian Beiz
Dissertation Nr. 2926
Deutscher Universitäts-Verlag, Wiesbaden 2004
Contents
XI
Contents
Foreword
VII
Preface
IX
Contents
XI
Overview of Figures
XIII
List of abbreviations
XVII
I.
Academic and Empirical Relevance of the Research Subject
1
1.
1.1
1
1.2
1.3
1.4
Research Objectives, Approach, Methods and Structure
The Relevance of Multi-Channel Distribution and Definition of
the Research Questions
Definition of Research Approach, Methods andProcess
Structure of the Dissertation
Conclusion
1
5
12
13
2.
2.1
2.2
2.3
2.4
2.5
Changes in the Distribution of Retail Financial Services
Challenges in the Distribution of Retail Financial Services
Changes in the Supply Side
Changes in Consumer Behaviour
Technological Changes: Impact of the Internet on Distribution
Conclusion
15
15
18
30
35
39
II. Framework for the Design of Multi-Channel Distribution Systems
41
3.
3.1
3.1.1
3.1.2
3.2
3.2.1
3.2.2
3.3
3.3.1
3.3.2
3.4
Major Analytical Dimensions of Distribution Systems
Nature, Objectives and Tasks of Distribution
Nature and Objectives of Distribution
Distribution Tasks
Theoretical Basis for the Analysis of Exchange Processes
Economic Theories: Transaction Cost Analysis
Behaviour-oriented Theories
Political Economy Paradigm
The Internal Economy and Polity of the Distribution System
The Task Environments of the Distribution System
Conclusion
41
42
42
44
46
46
48
51
51
54
57
4.
4.1
4.2
4.3
4.4
Particularities in the Distribution of Retail Financial Services
The Constituent Elements of Services
The Specific Properties of Retail Financial Services
Service Management: Distribution of Retail Financial Services
Conclusion
59
59
65
69
75
XII
Contents
5.
5.1
5.2
5.2.1
5.2.2
5.2.3
5.3
Impact of the Corporate Positioning on the Distribution Strategy
The Nature and Positioning of Distribution Management
Objectives of Distribution Management
Overall Corporate Orientation and Financial Objectives
Strategie Objectives
Marketing Objectives: Relationship vs. Transaction Marketing
Conclusion
78
78
80
80
83
88
94
6.
6.1
Classification of Multi-Channel Distribution Systems
Nature, Characteristics and Objectives of
Multi-Channel Distribution Systems
Focussed Multi-Channel Distribution Systems
Co-ordinated Multi-Channel Distribution Systems
Conclusion
96
6.2
6.3
6.4
III. Operational Implementation of Multi-Channel Distribution Strategies
96
100
105
112
115
7.
7.1
7.2
7.3
7.4
7.5
7.6
External Fit of the Distribution System
Branding and Communication
Customer Segmentation and Customer Management
Product Offering and Product Positioning
Cross-Cannel Pricing of Products
Change Management - Transformation of Customer Behaviour
Conclusion
115
115
126
136
142
149
153
8.
8.1
8.2
8.3
155
155
160
8.4
Intemal Fit of the Distribution System
Internal Structure and Processes of Distribution Systems
Customer Ownership and Remuneration of Distribution Channels
Change Management: Transformation of the Behaviour
of Intemal Customers
Conclusion
166
170
9.
9.1
9.2
9.3
Financial Steering of the Distribution System
Management of Distribution Systems as Profit Centres
Efficiency and Effectiveness of the Distribution System
Conclusion
172
172
177
182
IV. Conclusion
183
V. Bibliography
195
Overview of Figures
XIII
Overview of Figures
Figurel:
The Research Process
Figure 2:
The Different Phases of the Benchmarking Study
10
7
Figure 3:
Process in the Benchmarking Study
on Multi-Channel Marketing
11
Figure 4:
Structure of the Dissertation and Interplay
of the different Chapters
13
Figure 5:
Distribution Landscape for Retail Financial Services
19
Figure 6:
Consolidation Efforts of the Deutsche Bank
22
Figure 7:
Evolution of Channel Mix in the German Insurance Market
28
Figure 8:
Figure 9:
Comparison of Commission Costs for Life Insurance
across Distribution Channels
Break-down of Retail Mutual Fund Assets
by Distribution Channels
Figure 10:
Shirts in the Use of Distribution Channels in Retail Banking
Figure 11:
Use of the Internet in Germany for Insurance-Related Issues
29
30
34
(in millions, Forecast 2001)
37
Figure 12:
Reasons against the online Purchase of Insurance Products
38
Figure 13:
Dichotomy between Discrete Transactions
and Relational Exchanges
Discrete vs. Relational Exchanges and Clan- vs. Bureaucracy-like
Decision-Making Processes
Figure 14:
Figure 15:
The Analytical Dimensions of Distribution Systems
Figure 16:
Reconciliation of the Different Views on Services with the three
Phases of Services Delivery
Framework for the Analysis of the Different Dimensions
of Services
Figure 17:
48
53
58
61
64
Figure 18:
The Augmented Service Offering
67
Figure 19:
Different Dimensions of Service Management
70
Figure 20:
Description of rwo Generic Service Strategies
72
Figure 21:
Sales Approach for Different Customer Segments at Deutsche Bank
74
Figure 22:
Comprehensive Framework for the Analysis
of Distribution Systems
76
Figure 23:
Management Context for Distribution Management
80
Figure 24:
Implications of Different Financial Targets
for the Distribution Strategy
Product / Market Opportunity Matrix
82
84
Figure 25:
XIV
Figure 26:
Figure 27:
Figure 28:
Figure 29:
Figure 30:
Overview of Figures
Task-oriented Management Approach
by Tomczak and Reinecke
86
Phases for Defining the Strategie Positioning
of a Company
87
Management and Monitoring of the Sales Cycle
at the Deutsche Bank
90
Comparison of Relationship and Transaction Marketing
93
Impact of the Financial, Strategie and Marketing Targets
on the Distribution System
94
Figure 31:
Analytical Grid for the Analysis of Multi-Channel Distribution Systems
Figure 32:
Distribution System of Allstate Inc. (USA)
103
Figure 33:
Split of Profit and Service Time in German Retail Banking
107
Figure 34:
99
Major Value Drivers for
Focussed and Co-ordinated Multi-Channel Systems
113
Figure 35:
Customer Segmentation Approach of Nordea
128
Figure 36:
Value-based Marketing and
*• Customer Segmentation at Credit Suisse
129
Figure 37:
Customer Segmentation Approach of MLP
131
Figure 38:
Customer Segmentation Approach of Deutsche Bank
133
Figure 39:
Two-Dimensional Customer Segmentation Approach
for Financial Services (McKinsey)
Product Positioning
in a Co-ordinated Multi-Channel Environment
House Of Quality - Basis for the Definition of the Channel Mix
to Enhance Product Positioning
140
Figure 42:
Relative Distribution Costs (Survey among 33 Life Insurers in Europe)
145
Figure 43:
Concept for a Consistent Cross-Channel
Management ofPricing
Explicit Pricing System for Brokerage Services
at Citibank Germany
Nordea - Gradual Introduction of New Distribution Devices
and Channels
Figure 40:
Figure 41:
Figure 44:
Figure 45:
135
138
146
148
150
Figure 46:
Citibank - Evolution of Money Transfers
via Different Distribution Channels
152
Figure 47:
Organisational Structures for Multi-Channel Distribution Systems
157
Figure 48:
AXA Germany: Interfaces between the Product Manufacturer
and the Distributor
Resource Allocation Pattems
158
165
Figure 49:
Overview of Figures
Figure 50:
XV
Citibank Germany: Channel Strategy - Simultaneous
Reduction of Costs and Increase in Income
169
Figure 51:
Customer Touch Points Matrix
175
Figure 52:
Use of Target Costing for Defining the Relevant Dimensions for
a Distribution Concept based on the Customer's Requirements
177
Figure 53:
Deutsche Bank - Elements of Monitoring Sales Performance
180
Figure 54:
Comprehensive Framework
for the Analysis of Distribution Systems
Specification of the Major Dimensions of
Focussed vs. Co-ordinated Distribution Systems
Description of the Major Dimensions of the Extemal Fit
of Distribution Systems
191
Description of the Major Dimensions of the Intemal Fit
of Distribution Systems
193
Figure 55:
Figure 56:
Figure 57:
186
189